Wednesday, December 24, 2008

Fierce Competition + Invisible Hand = $1B Savings

BLOOMBERG -- American consumers and health insurers saved about $1 billion on generic drugs this year as “fierce” competition among drugmakers and pressure from insurers lowered prices. Total spending on generic drugs fell 2.7% to $33 billion in the 12 months ended in September, the biggest decline in at least a decade, the health research firm IMS Health reported. The average price manufacturers charged wholesalers for the copycat pills fell 8% while demand increased 5.4%, IMS said.

The surge in use was driven by a flood of new generic drugs that entered the market this year after patents expired on $16 billion worth of medicines. At the same time, insurers and retail pharmacies are pressuring generics makers to cut prices as they compete against each other. The trends are likely to accelerate through 2012 as half the current 20 top-selling pills get competition from generic copies, which can cost 70% less than their brand-name counterparts. HT: Ben Cunningham

5 Comments:

I wonder if this competition will create downward pressure on quality. Markets rely on information, and it seems to me that drug quality information is somewhat harder to come by than quality information for electronics and cars and other consumer products. Drug ineffectiveness can all too easily be explained away by blaming patients' body chemistry.

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> The 100+ people killed by tainted heparin ingredients from China are not longer concerned. The families are not too happy though.

Unfortunate, but when you talk about 100+ killed, that's out of how many users of heparin?

The event calls for a review of what happened, and how to prevent it in the future, but there's no such thing as a completely safe system. 100 users harmed by a drug used by probably hundreds of thousands, and probably millions, is hardly a catastrophe to anyone other than the direct victims.

Considering the number of people with Cable TV but no Health Insurance, I think there is a definite tradeoff in most people's minds as to how much of their income they consider appropriate to spend on health care.

Care should be taken to eliminate any subsequent occurrence of whatever happened but beyond that, it's the universe reminding everyone -- "Sh** Happens" -- and no human society will ever be so all-out perfect that that stops being true.